Advertising, legal bills among millions ECOT spending

Sunday

Sep 3, 2017 at 5:56 AM

Bill Bush The Columbus Dispatch @ReporterBush

ECOT has spent at least $2.25 million in taxpayers' money to pay attorneys for its thus-far-unsuccessful fight to keep the state from basing its funding on whether students participate in daily classwork.

Rather than tighten its belt since January 2016, when the state began requiring e-schools to document student participation to receive state funding, the Electronic Classroom of Tomorrow has spent tens of millions of dollars on attorneys, TV ads, a lobbyist and payments to founder William Lager's companies at the previously agreed-to rate.

And as its legal battle continued to fail, ECOT announced this summer that it would lay off 250 teachers and other employees.

Since being put on notice in early 2016 that it could owe the state $60 million because it couldn't prove that enough students participated in classes, the public charter school has continued to pay Lager's firms about $2 million a month, for a total of almost $33 million since the start of 2016, according to records provided in response to an Ohio Public Records request.

About $26.4 million was paid to IQ Innovations to provide online curriculum, and $6.6 million to Altair Learning Management to manage the school. Both companies are owned by Lager.

ECOT's academic underperformance has led to its effort to become a "dropout recovery" school in a bid to stay open.

TV advertising to attract more students added at least $1.5 million to the tab picked up by Ohio taxpayers; the money is generated mostly through state income and sales taxes.

It's unclear whether any of that money went to political TV ads that ECOT has been running against the Department of Education over the past year. The ads are being investigated by State Auditor Dave Yost as a possible illegal expense. An ECOT spokesman said the school paid for those ads, but the school's superintendent later denied that, though he didn't specify who did pay.

Meanwhile, starting in October 2016, ECOT doubled the retainer fee for its lobbyist and spokesman, Neil Clark, from $5,000 a month to $10,000 a month, records show.

Clark said in a written statement that because the Department of Education "elected to subject only a select number of e-schools to retroactive scrutiny, and ECOT was the largest of the schools selected, it necessarily has taken the lead in attempting to address ODE’s action, with the other e-schools deferring and awaiting the results of the ECOT litigation." Other e-schools also have retained legal counsel, he said.

Records show the law firm of Zeiger, Tigges & Little has billed ECOT an average of $161,000 per month from May 2016 to June 2017. The records do not include any payments made since then.

"In short, ECOT’s retention of counsel is hardly unique," Clark said. "What is unique, however, is that ECOT was forced to take a leadership role in the litigation, given ODE’s targeting."

And ECOT's court case isn't over. It has filed an appeal with the Ohio Supreme Court, which has yet to decide whether it will hear the case.

Charter schools don't have elected school boards, which would allow voters to act as a check on spending decisions. Rather, they have something akin to corporate boards whose members are chosen by their founders. So there's almost nothing that Ohio taxpayers can do to change these spending patterns, said state Rep. Teresa Fedor, D-Toledo, a charter school critic.

"When you look at the money trail, it started, of course, with the taxpayers to educate our children," Fedor said. "This is a privileged education system from beginning to end, and the privilege goes to the owners. There's going to come a day when Ohio citizens have to decide: Are you going to allow this fleecing of our tax dollars, and not educating our children?"

The decision to spend so much on the lawsuit doesn't surprise Chad Aldis, vice president for Ohio policy and advocacy for the Thomas B. Fordham Institute, a school-choice advocate and sponsor of 11 schools. Because ECOT views its situation as a life-or-death struggle, "it's like you've got nothing to lose," Aldis said.

"It's a rational response, especially when you think you're in the right," Aldis said. "ECOT, I believe, is utterly convinced that they did earn that money. This would seem to me to be something that could have been compromised."

Clark said the money paid to Lager firms Altair and IQ Innovations is "subject to legally enforceable agreements, and ECOT has sought, both in court and otherwise, to honor its contractual commitments."

ECOT "secured extremely favorable pricing" under the Altair and IQ contracts, which take 20 percent of the state gross funding — on the low end compared with other charter operators, Clark said.

White Hat Management, the influential dropout-recovery operator whose founder, David Brennan, is also a major GOP donor, takes 97 percent of state revenue in return for running the schools, according to the information supplied by Clark.

Like Brennan, Lager is a large donor to the Ohio GOP, which dominates in state government.

The Dispatch reported in July that from 2001 to 2016, ECOT took in more than $1 billion from Ohio taxpayers and paid more than $170 million of it to Lager's companies. During that time, Lager amassed real-estate holdings worth millions while donating $2.1 million to influential state officials.

bbush@dispatch.com

@ReporterBush

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